Joe O'Toole (Independent)

I welcome the Minister of State to the House and I am pleased time was made available to debate the issue. I asked for the debate because I wanted to kill a few myths about public private partnership. Public private partnerships as established in the UK and Northern Ireland bear no relation to public private partnerships in the Republic of Ireland. They are different arrangements. There is very little to be learned by examining the mistakes made in England. The debate on public private partnerships has been dogged by the fact that one company, Jarvis, has been involved in both jurisdictions. It ran into difficulties in the UK and people point to the difficulties here. The two issues should be kept separate, and any discussion should be informed by this fact.

The Department of Finance has been less than enthusiastic about public private partnerships. It said one thing and did very little. It has been very slow, as is always the case, to be flexible in regard to funding arrangements. The Minister of State referred earlier to the importance of new methods of financing while Senator Mansergh referred to an arrangement under the last national agreement, which supported public private partnerships. The trade union movement looked very long and hard at this and, after a long period of discussion involving the trade unions, IBEC, the Department of Finance and a few other Departments, we finally came to an agreed position on public private partnerships. These are the role models of best practice for Europe. If the UK considered what we are doing it could learn much. There are also things we can learn from our own experience.

The importance of securitisation was included in the national agreement. This is another way of raising money, which is allowed for under local authority legislation. It is a matter on which I would like to have a long discussion in the future. A crucial point, raised earlier, is that until a couple of years ago, the eurocrats took the view that public private partnerships did not transfer risk, which was completely wrong. When I tried to ascertain where they got their information, they told me it was from the Central Statistics Office. I telephoned the CSO and asked where it got the information to tell Brussels that public private partnerships did not transfer risk and, therefore, were part of Government borrowing. It said it came from the Department of Finance. This is the reality of the problem. The previous Minister, Deputy McCreevy, worked hard at the time to fight against the interpretation. This is now changed and public private partnerships are not seen as part of Government borrowing.

In his speech the Minister of State pointed out that these projects are usually design, build, finance and operate but sometimes they are simply design, build and operate. We must have learned that people who are good at building are rarely good at raising finance. In most, but not all cases, the financing of these projects should be separated. Finance should be the first part of the project and design, build and operate should be the second part. We should seek to carry out both projects outside of Government borrowing.

The Minister of State referred to the State providing finance. That is not the only option. Let us suppose a public authority wants to get involved in a project under a public private partnership. Having costed the project, it can raise funds in a number of ways, including securitisation, loans and the cheapest money it can find. It can then put out to tender the cost of building, financing and operating the project. That will make it possible to take on good contractors to do the job while getting the best value for money and the best kind of building specification. This aspect has not been explored and those involved in projects invariably raise it. In the modern world, in particular, the various methods of financing are so complex and obscure to ordinary people, including those involved in contracting jobs, that it is better to separate the two issues.

Returning to the area of education, not all public private partnership projects need to be huge. They are not all roads or bridges or colleges of music. Single primary schools could be considered for public private partnership. The reason it cannot be done at the moment is the extraordinary costs of tendering, bidding and bonding that apply to public private partnerships.

The Government is facing a major problem regarding the building programme for primary and post-primary schools in terms of the cost of the building programme and the availability of money. In every town in this country there are successful building contractors who, no matter how steeped they are in the private sector and in making profit, would like to have their name on the building of the local school and would be delighted to build it. They would do it just to achieve the associated feel-good factor. I have asked small builders about this and they have told me they would love to do it. However, they can never do it because of the early costs.

Many of the jobs that have been sent out to public tender end up being done by small local contractors who are paid by the big tenderer to do the small jobs. We could get around this. Senator Scanlon is the next speaker in this debate. He and I have discussed this issue on many occasions. We could have a situation where designs would be available as part of the specification for a school project. Then all that would be necessary would be to obtain financing and get somebody to build and operate it, meaning to maintain it for a specified number of years. I would appreciate if the Minister would set somebody to work on that in his Department. I could do it. It is not rocket science. However, there must be a political drive behind it. The Department would state what design it wanted for a school, provide a specification and make it easy for people to get bonding and arrange for financing. If that were done, smaller operators could become involved in public private partnerships, there would be greater competition, more local involvement, more local commitment and a hugely successful outcome. It would also help the Government cashflow.

Let me turn now to the role of the Comptroller and Auditor General. The Comptroller and Auditor General missed the point completely. It bothers me that this was not taken up by the Government. The Comptroller and Auditor General does a great job for all of us but, no less than a bishop, he should sometimes have to answer questions. The Minister rightly stated that the Comptroller and Auditor General examined the costs only to the point of delivery. I would like to send him down to some of the schools that were built, where the principal and the board of management do not have to worry about the maintenance of the school, where they do not have to worry about the cleaning of the school or the heating of it, where all that is done as part of the contract, where the school has a higher level of maintenance specification than any other school in the surrounding area and one finds a happy school community of management, parents, pupils and teachers and no maintenance costs for the State over a period of 20, 25 or 30 years.

I cannot believe the Comptroller and Auditor General did not factor that into his calculations. Consequently, having spent two years trying to sell the concept of the positive potential of public private partnerships, he has given out a negative message regarding them so that we are now on the back foot trying to defend the concept and must start all over again to persuade people that this is something worth doing. I am not saying every project is a good one. What I am saying is that this can save money and deliver a better project with local involvement if we set our minds to doing it correctly. It is value for money and that is how we should look at it.

In this context the Minister could consider smaller projects, for example a local two, three or four teacher primary school, which would not interest the Jarvises of this world. Public private partnerships are currently exclusive of small contractors because of the cost of the bond and of the tendering process. We could eliminate these costs without breaking any European rules. It would be a simple matter to provide designs with specifications. We could then also provide a much cheaper bonding system.

There is another point which the Minister of State may have made in his speech — I was not here for it because I had an engagement I could not get out of. I scanned through his script and will read it in more detail later. There would be no risk to Government. If the State owned the land on which the school is built, and the building is there and the Government has not put any money into it, the worst that could happen is that the contractors will walk away and the State will have a school for nothing. We need to drive home the possibilities and what could be done.

Bureaucracy is the cause of the problems. The biggest negativity arising from public private partnerships relates to the School of Music in Cork. It attracted bad publicity because in the middle of the process, EUROSTAT stated that the finance involved was part of Government borrowing and would therefore have to be included within the Maastricht guidelines and all the other requirements regarding monetary funds and so on. Consequently the Government had to pull back. Then Jarvis UK ran into trouble and everybody presumed we would have the same trouble here.

We need a debate to point out these problems and they need to be taken on publicly. This is the only country in western Europe where the trade union movement is fully supportive of public private partnerships because there are enough inbuilt safeguards. Moreover, the trade union movement is progressive in its approach and can see the value of public private partnerships because money can be released by Government to do other things and we get the value locally, specifications are up to standard and the State can be a net winner.

Am I missing something somewhere along the way? Is there something about this we do not know? I assure the Minister that, wearing another hat at another time, I fought very hard to get support for this in the Irish Congress of Trade Unions. I know every argument against the concept. They were all dealt with and we came up with a system that was attractive to all the partners, a Chinese bargain, attractive to business, to the trade union movement, to Government and to the people. The only experience we have had of this is in Sligo. I would defy any of the critics of PPPs to visit the schools in Sligo, about which I am sure Senator Scanlon will shortly make us aware, and try to find any unhappy campers. There are none. They are very happy. They must be the people to which the economists spoke. They are very happy about the delivery of the project there. If we are talking about moving this forward, we can certainly get things done.

Let me turn from education to the issue of tolls. Senator Mansergh stated that he hoped not too much of the money was going to the private sector. Unfortunately, huge amounts of money are going to the private sector. The toll bridges in Dublin are the result of very successful public private partnerships under the older system but despite the fact that they are making wheelbarrow loads of money and are earning far more than they ever expected, they are now talking about putting up the price. The Dublin toll bridges, which were built years ago, are a good example of everything that is wrong about public private partnership — the taxpayer builds 20 km of road, National Toll Roads builds 100 m, and it gets not quite all the money but everything that is collected. That is madness. Surely no PD in the world would go along with that. It is giving money away. It should never have been allowed to happen.